Bookkeeping is an important function for every type of business.
It is vital to the business’ success to ensure that all of its financial transaction records are accurate and kept current. This also includes any legal obligations attached to invoicing records and Single Touch Payroll.
However, you do not have to hire an accountant to manage your company’s bookkeeping needs.
What Is Bookkeeping?
Bookkeeping is the process of systematically recording and organizing all of the financial transactions of a business on a daily basis.
It is vital to the business’ success to ensure that all of its financial transaction records are accurate and kept current.
This is especially true for small business owners and start-ups that have limited capital or sources of funding. You have to stay on top of your finances. Every cent spent and earned must be accounted for.
Having accurate financial recording is important to ensure your business expansion strategies are funded without compromising your monthly cost of operations.
In fact, poor money management or bookkeeping practices is one of the main reasons why many small businesses shut down after five years.
Accurate bookkeeping provides you with the data you need to develop your business expansion strategies. In business, strategy follows numbers not the other way around.
Therefore, your business should have its bookkeeping function covered. The question is what is the best way to handle bookkeeping for your business?
- The Bookkeeping Conundrum: Should Business Owners Manage Their Own Books?
As we mentioned earlier, you don’t have to hire an accountant to manage your books.
This can be done by anyone with an accounting degree. He/she does not have to be a Certified Public Accountant or CPA. In fact, you can even hire someone who has a degree or has received adequate training in Office Administration.
The important thing is the person who will handle bookkeeping duties should know how to manage the following key functions:
- Journal Entries
- Prepare Income Statement
- Prepare Cash Flow Statement
- Prepare Cash Disbursement Schedule
- Create and Track Expense Accounts
- Monitor Cash Inflows and Outflows
- Track Account Payables
- Track Account Receivables
- Manage Cash Sales
- Manage Inventory
- Prepare Payroll
- Prepare Benefits Schedule
The first four functions are very important for business owners.
The income statement acts as a guideline for your budget. The cash flow statement lets you know how your cash is being managed. Meanwhile, the cash disbursement schedule ensures you stay on top of your monthly payables to creditors and suppliers.
Now, some business owners like to be in charge of everything. They want to be sure all tasks are accomplished properly. So instead of hiring someone to handle bookkeeping, they do it themselves. This, in addition to the other duties and responsibilities they have to carry out on a daily basis.
“No problem. There are bookkeeping software programs that will do the work for me.”
While that may be true, you still need to regularly update the data that goes through these bookkeeping software programs. Because of the multitude of tasks you have to do every day, it is very easy to overlook the updating of new information.
Even if you do find time in a day to manage your books, it will come at the expense of the essential tasks that need to get done in order for your business to succeed.
There are two kinds of tasks that businesses have to manage. These tasks are categorized as either essential or non-essential.
Essential tasks are those that are directly related to the main enterprise of your business. For example, if you are managing a real estate agency, your essential tasks will be as follows:
Meeting with potential buyers and sellers of property
- Presenting property to buyers
- Assisting sellers in selling their property
- Negotiating the sale of property
- Building your leads list
- Handling documentation on property transactions
These tasks once accomplished, can add dollars and cents to your business’ bank account. The more time you spend on them, the greater the opportunities you create for expanding your business.
On the other hand, non-essential tasks are the duties and responsibilities that are more supportive or administrative in nature. They do not directly contribute to improving your business bottom-line. Nonetheless, they have to be attended to in order to keep your business moving forward.
As important as bookkeeping is for your business, it falls under the category of non-essential task.
You need bookkeeping to keep track of your expenses such as obligation to creditors and suppliers. Can you imagine being on a Skype call with an important buyer of real estate then your audio-video conference gets cut off?
You find out that the reason the Skype call was interrupted was because you forgot to pay the last Internet bill.
If you had good bookkeeping practices implemented in your business, the bill would have been paid on time and the Skype call would have continued uninterrupted.
As the business owner, you should focus on accomplishing tasks that support business expansion. With only 16 to 18 hours in a day to manage your business, time is a very valuable commodity. How you use it will determine whether your day will be productive or not.
Consequently, your level of productivity will determine whether your business will succeed or instead find failure.
Therefore, if you want to grow or expand your business, you should allocate more time in the day to managing tasks that will contribute to its success. Just because you have the skills, experience, and training to manage your business’ bookkeeping tasks doesn’t mean you have to.
- Smart Bookkeeping Practices: How To Expand Your Business While Managing Your Book
It is easy to understand why a business owner would prefer to handle his or her own bookkeeping. There are valid reasons why they would do so.
First, bookkeeping deals with money matters. You may want to exercise greater caution when it comes to managing confidential information such as the identities of your clients or customers.
Second, hiring a bookkeeper is an expense. He/she will not bring in revenues to the business. You have to cover the bookkeeper’s monthly salary. Similarly, you also have to allocate funds as contributions to government mandated employee benefits.
All told, the cost of hiring a bookkeeper is estimated to be equivalent to 1.4 times of his/her basic salary.
Then there are the incremental expenses. These include rental space, Internet bandwidth, telephone charges, transportation costs, and office supplies.
If the business is not generating consistent revenue, hiring a full-time bookkeeper will drain its limited resources. For start-ups and small business, this is exactly the situation. In most cases, payback period for the business is five years. It will be difficult to maintain a full-time bookkeeper on payroll.
Is there a viable solution?
The answer is, “Yes”. A smart way to manage your bookkeeping function is to outsource it.
Outsourcing is the process of transferring or delegating a task to a qualified third party service provider. The key word is qualified and there are professionals who have the prerequisite skill sets to manage your bookkeeping functions like an expert.
These professionals are called virtual assistants or VA’s. Virtual assistants were once thought of as virtual secretaries or virtual personal assistants. Time has allowed the skill to evolve and virtual assistants are more than just secretaries or personal assistants.
You can easily find virtual assistants who can manage your books like a seasoned bookkeeper because they are experienced bookkeepers!
Many virtual assistants came from the traditional brick- and- mortar office. They worked 9-to-5 jobs as bookkeepers or office administrators. Some have a degree in accounting but did not take the CPA exams.
They decided to crossover to the virtual world because just like you, they wanted to manage their own time.
You can find virtual assistants who can handle the key bookkeeping functions we summarized earlier. They also have the following skill sets:
- Knowledgeable in the best bookkeeping software programs: QuickBooks Pro, FreshBooks, and Xero.
- Proficient in MS Office; they can create professional-looking spreadsheets and Power Point presentations for your client meetings.
- Highly-organized; they will provide you all the important financial statements whenever you need them.
- They can easily update your Client Relationship Management or CRM database.
- They have other useful administrative skills: email filtering, phone handling, appointment setting, and calendar management.
Best of all, contracting a Virtual Assistant as your bookkeeper is a cost- effective solution for a number of reasons.
First, as a contracted professional, you don’t pay the VA a basic salary and monthly benefits. You only pay them per productive hour or only for the hours spent managing your business. The VA is responsible for paying his/her own benefits, and costs of business such as Internet, power, and office supplies.
Second, you dictate the number of hours. If your budget only allows 20 hours per week, then that is all that you pay for. In contrast, a full-time employee should be compensated for a minimum of 48 hours per work week.
Therefore, if you want to have regular bookkeeping done for your business, contract the services of a Virtual Assistant.
You will never have to worry about where your money is going or missing payments to creditors. It is a cost-effective solution that allows you to allocate more time for functions that contribute to business expansion.